thanks for watching. i'm megyn kelly. here's "studio b" with trace in for shep. >> this is "studio b." the irs scandal went beyond rogue agents in cincinnati. that's what we're learning from just released documents showing senior officials signed off on the targeting of conservative groups and those groups are filing a lawsuit. and it turns out it's tough to be a terrorist. that's according to a newly uncovered al-qaeda performance review. the terror group has issues with expense reports among other money day management issues. dire warnings of a deadly new virus on the move. health officials calling it, quote, a threat to the entire world. that's all ahead unless breaking news changes everything on

"studio b." but first the internal revenue service targeting of conservative groups went beyond rogue agents in a legal field office. instead it had the approval of high ranking officials in d.c. that from an attorney who filed suit against the tax agency. he rents groups that received letters from the irs demanding the groups turn over all sorts of information, something that attorney says tramples the constituting. the letters tell a different story from irs officials. some have return addresses in washington, not cincinnati where officials claim the scandal originated. the letters bore signatures of high ranking irs officials including the now suspended director, lois lerner.

on more than a dozen letters, last week she outraged lawmakers by refusing to answer questions in congress. lerner has said she learned of the targeting from news reports in early 2012 but an inspector general's report found she knew of it in 2011 and ordered it to stop but some of those letters were sent in 2012. listen to the groups' attorney about this. >> between the letters from the department -- on the department of treasury irs letterhead in washington, d.c., the lois lerner signatures, the meetings between lerner, white house council and chief of staff about how to get ahead of the inspector general report blows the narrative for the white house. >> for it's part the white house denies knowing anything about the tax agency's targeting saying president obama first learned about it from news reports. doug mche will way is live in washington. if it's not low-level staffers in cincinnati responsible for this, who is?

>> well, trace, that's the question several different congressional committees want answered. one clue may be the number of times douglas shulman visited the white house. 118 times. his predecessor one visit in five years. why so many visitors by shulman? >> the easter egg role with my kids. questions about the administer ability of tax policy. >> shepard: i have nothing but the highest regard for submissioner shull shulman and his team. when you bring the service in closer to the white house and other agencies, you just run the risk of eroding that independence. >> we were concerned with an orchestrated campaign starting at the very top of the white

house to attack and disparage the coke family and their enterprise. >> conservative groups targeted have reason to doubt independents, in addition to the groups represented, propublicca published confidential filings on six conservative groups. the former chair of the council of economic advisors admitted divulging confidential information on how coke industries was organized. ted olson spoke about coke industries and how they were targeted. >> that's worded irs is awaiting another potential bombshell from its inspector general's office. >> you might remember a videotaped star trek spoof performed by irs workers at great expense, $60,000 to

taxpayers. that spoof was part of a expensive conference attended by irs employees, now the subject of an investigation. sources told fox news one reason sewello shullman was visiting the white house so often was to address how to handle the news. they have another bombshell that's still awaiting them. >> we remember the guy in the hot tub well. for more, bob could you sack, manage -- cusack, managing editor for the hill newspaper. this goes to the heart of d.c., getting worse by the day. >> absolutely. this story broke on may 10th. now we're at the end of may. this is going to go into june. it's going to go into july because you have the ongoing probes and lawsuits.

this drip, drip, drip, that the administration -- they keep feeding us news. first they said nobody at the white house new. then aides knew. the handling has been fumbled and the irs is saying there were mistakes but no one is owning up to them. we don't have a lot of names of who made the mistakes and that's why this is going on for quite some time. >> i want to play one more sound bite from the chief council for the american center for law and justice who is bringing the lawsuit. >> what the documentation shows which is significant is that this was not low-level irs agents, that this was pervasive, at the highest levels when the irs and we now know and this is fact that treasury -- the department secretary of the treasury, who is appointed by the president, the white house council and chief of staff were aware of the situation. >> so the problem, bob, like all scandals is the administration's

story keeps being adjusted here and there. >> no, it does. it keeps changing. anytime -- as you know, anytime you have a controversy or scandal, the rule is get everything out but the problem and suss suspicion is they're hiding something because their story keeps changing. that's the problem for this administration. first they said rogue officers in this little tiny cincinnati office and they didn't mention at that time in the beginning that's the office that deals with it. now it's tracing back to washington and we're figuring out lois lerner signed the letters and people at the white house knew and the shullman visits raises a lot of questions. >> bob, good to see you. thank you. >> thanks, trace. a fox news weather alert. new storms triggering more tornadoes in america's heartland after a series of twisters tore through kansas yesterday. listen.

i mean that was the second day in a row that tornadoes touched down in the state. forecasts indicate today's weather could bring kansas baseball sized hail and some big time winds as well as more possible twisters. forecasts also show the storms could sweep across minnesota down to texas. rick reichmuth is live in the fox weather center. how bad are we talking? >> today the worst of the next three days. we had about ten days ago, we're looking at a similar setup. yesterday west kansas, parts of west oklahoma. right now where the tornado warnings are, both of these -- excuse me, watch boxes until 10:00 p.m. local time. most of these cells are just severe. you see the yellow boxes, severe indications we have hail, certainly over an inch, maybe tennis ball right now. winds up to around 60 miles an hour. as we go forward the next couple hours, we'll start to see

rotation, especially west kansas and western oklahoma. look at the future radar, what it does. you start to see storms explode within the next couple hours, even towards dallas you want to watch this as well as areas of nebraska. you'll see the big storms through oklahoma city and by the time we get to late overnight hours, it's a rain and wind event. a lot of rain, however, toward that flooded area of iowa. the biggest threat, where you see yellow we could see tornadoes but the red is the biggest concern a moderate risk, trace? >> we've been seeing the red blots on the map for the past 10, 11 days. what about the next couple days? >> red is elevated risk. we've not seen it much this year. now we're getting into that season. tomorrow, a slight risk, although i wouldn't be surprised by tomorrow morning to see a red -- that moderate risk he will indicated across kansas and eastern oklahoma. that's tomorrow. friday still dealing with it

from detroit back towards red river again pushing north of dallas. >> kind of sat when you're looking forward to yellow. rick reichmuth live in the fox extreme weather center. thank you. just in, drama at disneyland. anaheim police in california say a disneyland employee has been arrested on suspicion of possessing a destructive device. following a dry ice explosion in a trashcan that happened at the park last night. the suspect is a disneyland cast member, the name for employees. his name is christian barns, he's 22. we're told an outdoor vending cast member. police say he's now being held on $1 million bail. that's a lot. it means it's serious. police evacuated a section of disneyland's tune town after an explosion was report last night. disneyland says we take matters like this seriously and are

working closely with all local authorities. a recently obtained secret letter from al-qaeda leaders reveal interesting details about the inner workings of the terror organization. al-qaeda does job performance reviews and apparently one high level militant was not doing a very good job of killing people. the bosss didn't like how he never returned their calls and there's more. the details on that next. it starts with little things. tiny changes in the brain. little things anyone can do. it steals your memories. your independence. ensures support, a breakthrough. and sooner than you'd like. sooner than you'd think.

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>> trace: one of the world's most wanted terrorists may have been a terrible employee. this is the mastermind behind several recent terror attacks including an algeria gas plant. he was known as the marlboro man but according to a letter, "the associated press" obtained, his former bosses at al-qaeda

complained he never carried out a single spectacular attack and never returned calls, failed to turn in expense reports and a poor job of fundraising. jonathan, what other details did we learn? >> basically, trace, that al-qaeda bosses have the same sorts of problems with their employees that many other companies, more traditional companies, might have. they were angry with mackta, who had written to his bosses. the bosses accused him of backbiting, name calling and sneering and said that he and his so-called masked brigade weren't good at their jobs. they wrote in their letter any observer of the armed actions in the sahara will notice the fairly of the masked brigade to carry out spectacular operations despite the region's vast

possibilities. plenty of mew jah, weapons widespread and targets in reach. they had successfully taken a canadian hostage then sold him back for a ransom of $900,000 when the going rate should have been 3 million, trace. >> trace: because nobody likes being called a lousy employee, this terrorist apparently set out to prove his bosses wrong. >> he did do in spectacular fashion. of course he declared independence from al-qaeda and said his group would operate on its own and carried out the attack on the gas plant in algeria in january. bringing back some -- about some 100 deaths. a terrorism expert we spoke to said in many ways he's a prototype for what al-qaeda always wanted to achieve.

>> when osama bin laden first worked for the saudis and dispersed funds to send jihadys in afghanistan his idea was these people would be networked and franchised, taking that fight from one small remote area to every city and country around the world. that's happened. so he's the perfect model for what al-qaeda should be if they want to achieve their global goal. >> roberts points out in many ways this is more dangerous, more difficult for the u.s. and others to combat these groups operating independently of the central al-qaeda leadership, trace. >> trace: johnathan hunt live in new york, thank you. well, new trouble for attorney generals eric holder. several g.o.p. lawmakers demanding he begin talking. now. about why the justice department apparently targeted journalists. they've given the attorney general a deadline and it's very

soon. a live report in what the scandal could mean for the administration next. ♪ ♪

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>> trace: republican lawmakers giving attorney general holder holder one week to answer questions about producting journalist. in a letter the house judiciary chairman demands the attorney general detail his involvement in the investigation of fox news' james rosen. the chairman questioning holder's comments during a hearing a couple weeks ago. listen. >> with regard to the potential prosecution of the press for the disclosure of material that's not something that i've ever been involved in or heard of or would think would be a wise

policy. >> trace: last week the justice department confirmed the attorney general had been in discussions to approve a warrant request to search james rosen's phone records and personal emails and now the same committee investigating whether the attorney general lied under oath. shannon bream is live in our d.c. newsroom. tell us more about the letter. >> in that letter, the chairman of the house judiciary committee, republican from virginia is giving the attorney general one week to answer for inconsistencies in holder's sworn testimony asking how can you claim to have never been involved in the potential prosecution of a member of the media but you were admittedly involved in discussions regarding mr. rosen's emails. another question asked, how can you maria claim to have never heard of the potential prosecution of the press but were add a minimum involved in discussions regarding mr. rosen. the co letter said it's

important to hear directly from the attorney general to figure out whether or not he may have committed perjury. trace? >> how are the democrats responding to this? >> the judiciary committee's top democrat sees things differently saying i believe attorney general holder who answered questions over four hours was forthright and did not mislead the committee. there's no need to turn a policy dis agreement into misconduct. today white house press secretary jay carney responded to a question about whether the president is behind these meetings with the top news chiefs in washington. >> he's asked the attorney general to meet with media organizations. he's asked the attorney general to review policies and procedures that govern the way the justice department approaches these issues. and to report back to him on that review. >> reporter: in the meantime carney says the president

continues to have full confidence in the attorney general saying he's doing his job with integrity. >> trace: hmm. shannon, thank you. joining us from d.c., real clear politics.com reporter caitlin hughie burns. as you heard shannon say, no surprise you have republicans saying holder lied and misled congress and democrats saying he was quite honest. your thoughts? >> break down what they're going after. house republicans are saying or pointing to an exchange in which holder was asked whether the doj can and has producted journalists and his answer was no, i have not been involved. now it's a little bit -- there are some questions because of course he signed off on a search warrant for a reporter's email address but the question of whether they have made prosecutions in this case is -- they have not. >> trace: i don't think that's the question. let me stop you because i don't think that's the question.

i want to play it one more time and ask you about this. play it again, what eric holder said. >> with regard to the potential prosecution of the press for the disclosure of material, that's not something that i've ever been involved and heard of or would think would be a wise policy. in fact, my view's the opposite. >> trace: the phrase was potential prosecution there. potential prosecution, he -- in the document he accused james rosen of aiding and abetting. you can be prosecuted for that. >> that's why the judiciary committee has a lot of questions. one is did you intend to product james rosen or, if not, why did you refer to him as a co-conspirator in this case. was there anything -- another valid question would be was there anything that you found in the seized documents or exchanges that might have led you to believe that there was some criminal activity there.

so of course there's still a lot of questions. and this is not -- if it's up to house republicans this is not going away. >> trace: yeah, and look, it's clear eric holder's going to leave this position, the question is when. it's not a politically enviable time to leave. nice to see you. >> thank you very much. well, it has not been a week since president obama announced he was placing tighter restrictions on droning terrorists and today we're learning one of the world's top suspects is dead. reportedly killed in a drone strike. the operation complicating the debate over the use of drones. plus, an american mother of seven looking at years in a mexican prison on charges of drug smuggling. have you heard about this story? the woman's husband claims somebody else planted the drugs and now she's fighting for her freedom in a mexican courtroom.

that's coming up.

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group. the white house would not confirm his death and the taliban denies it but if it's confirmed it would be the first drone strike since president obama laid out new rules for the practice of droning last week. the taliban leader allegedly was killed and he was wanted for bombing of a u.s. base in afghanistan in 2009. seven cia agents died. jennifer griffin is live for us at the pentagon. is there anything international about the strike? >> only that it comes six days after the president laid out in a speech just how such actions should be used not in retaliation when american lives are directly threatened. >> america cannot take strikes wherever we choose. our actions are bound by consultation with partners and respect for state sovereignty. america does not take strikes to

punish individuals. we act to pose a continuing and imminent threat to the american people. when there are no other governments capable of addressing the threat. >> the strike on the number two leader in pakistan's taliban raised eyebrows in washington since the president is suggested such strikes would be more restrictive in the future. the pakistan taliban is separate from the afghan taliban and more focused on targeting islamabad than new york or washington. >> trace: what's the white house saying today? >> essentially that wally are a man was responsible for the deaths of those seven c.e.o. agents in host in afghanistan and as long as there are 66,000 u.s. troops in afghanistan there's a need for strikes in pakistan to protect those troops. >> i think that you have to look at what the president said last

week about direct action and direct targeting, and also understand as he said that we have troops in harm's way in the afghan war theater and we need to take actions that are necessary to protect those troops. >> reporter: the president suggested last week no drone strikes would be authorizessed if there's a possibility of collateral damage or seven casualties. according to witnesses seven people were killed in the drone strike in addition to the pakistani taliban's number two. >> before any strike is taken, there must be near certainty no civilians will be killed or injured. the highest standard we can set. >> the strike at an awkward time for the pakistan new prime minister elected may 11. theth issue of drone strikes was a big issue during that election in pakistan. >> trace: jennifer griffin live at the pentagon. thank you.

britain has sent new information to the united nations on syria's use of chemical weapons against its citizens. evidence shows the syrian government and nazi opposition behind the alleged attacks. president obama has long said the use of chemical weapons would cross a red line and could get the u.s. involved. french officials are testing samples for evidence of chemical weapons and will release those results soon. meantime syria's foreign minister said bashar al-assad will remain president until at least 2014. that's when new elections are scheduled but the foreign minister said assad may run we're expecting more court testimony today in the case of an american mother behind bars in mexico. authorities there accused her of trying to smuggle 12.5 pounds of marijuana across the border. her family is pleading for her

release insisting somebody framed her. the woman and her husband say they were returning to arizona from a funeral last week when soldiers searched their bus at a checkpoint 90 miles from the border a spokeswoman for the mexican army said the soldiers found the marijuana under her seat. authorities say they believe somebody else was trying to smuggle the drugs. >> being her daughter, not able to see my mom, it's a nightmare you can't wake up from. let her come home. let her come home. she's innocent. >> the woman was born in mexico with you became a u.s. citizen 17 years ago. they have seven children and authorities originally demanded $5,000 for his wife's release and we should know by friday whether or not she'll stand trial. and drew hassen is live at the

border in arizona. what are the details of the accusations? >> trace, the formal accusation is drug smuggling. that carries a penalty of ten years in prison. today in court just across the border here in no gasol we expect to hear from the people who made the stop in mexico andrded everybody off the bus. they claimed they found 12 pounds of marijuana under this 42-year-old mother's seat that was strapped to the bottom of her seat with bungee cords. her u.s. attorney who is helping with the mexican attorney has seen the pictures and called all of the accusationings preposterous and said in america if something like this happened, if lawyers presented this kind of evidence in an american courtroom, they'd be laughed at. >> we've gone through all of the pleadings they provided to us and they have allegations she

colluded with the driver of the bus, which is preposterous. they were the last ones to arrive and sit on the bus and they took the last two empty seats. something that if you realize, if you are detained. unless you have someone on the outside you're at the whim of the system. >> we're talking about a 42-year-old more raising seven children. she's been married a year to her husband who is fighting on the other side of the border. the mexican military officials were order today appear in court but the question is whether or not they'll show up despite being ordered to be here. >> trace: another big question, what are the mother's options exactly down there? >> reporter: yeah unfortunately if things don't go her way t turn out very bad. she's facing ten years in prison. so the judge has the option to either throw the whole case out or say it should go to trial. if it goes to trial, she could sit in a mexican jail for a

couple of months before she actually gets to be in front of a judge and let the process go forward. that's a nightmare for the family. just to give you an idea what it's like in the woman's prison on the mexican side of the border, family members minutes ago came by with cups, forks, knives they bought at a local store. in the jail they don't provide those, family is supposed to do that so they're bringing basic necessities to her across the border. >> trace: the conditions are less than great. andrew, live for us in arizona. thank you. let's get more on the case and the mother's legal options. what does she do? heather hanson is a criminal defense attorney. i've been in mexico meantimes and was pulled over and one time i did nothing. if you don't have 100 bucks, you're going to jail. she didn't carry six kill lows of pot on to the bus and tape it under the seat. they have no evidence, yet she

could being in jail for months. >> that's absolutely right. what he said is correct. mexico has the highest rate of arrests of americans other than america in the world. they have more american prisoners than anyone else in the world other than america. the interesting thing is in mexico, you're guilty until proven innocent so she's climbing a tough wall here. it's going to be a tough fight for her. >> trace: i don't think people understand that in mexico, what happens in the court is they give all the testimony then you have the prosecutors and defense attorneys looking over the court reporter's shoulder. she types it, hands it to the judge, the judge reads it and he makes his decision and that could take several more days. >> that's right. i think the smartest thing that the family has done is brought the media into the case. you guys covered back in december a marine who was arrested in mexico for possession of a firearm. until the media got involved, that case -- he languished in

prison five months. she's been in prison a week with senators on her side, the state department watching and that's going to make a difference. the system is definitely so different from the american system and very difficult for us to traverse. so it's heavily to have the state department involved. >> trace: very quickly, i mean is it helpful for her to have attorneys on this side of border helping or is it now use? >> i think it's helpful. the more eyes looking at this, the more people involved, the better. again, the good thing is with all the media attention, the judge has to be very careful to do everything by the book. thus far there's question about whether it's been done by the book so it's helpful to have more people involved. hopefully there's good news on friday. >> trace: hather hanson. thank you. appreciate it. >> thank you. >> they said jeff flake, senator from arizona, was involved. he's trying to work this side of the border but right now,

without the mexican embassy's help there's not a lot to do. human error caused a mortar explosion that killed seven u.s. marines in nevada. a military spokesman says the marine operating a mortar tube and ammunition did not follow procedures triggering the explosion during an exercise in march. the investigation determined the team conducting the exercise did not have the appropriate training. the marines removed three officers from their posts following that incident. the republican fire brand and tea party favorite is now calling it quits. the surprise announcement from michelle bachman. a live report on that is next. [ male announcer ] this is kevin. to prove to you that aleve is the better choice for him, he's agreed to give it up. that's today? [ male announcer ] we'll be with him all day as he goes back to taking tylenol. i was okay, but after lunch my knee started to hurt again.

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>> trace: one of the tea party's most famous advocates, michelle bachman, says she will not run for reelection. the minnesota republican and former presidential candidate made the announcements this morning saying she was not worried about whether she would win another term. >> i've always in the past defeated candidates capable, qualified, and well funded. and i have every confidence if i ran, i would again defeat the individual who he defeated last year who recently announced he's once again running.

>> bachman says ongoing investigations in the finances of her 2012 campaign had nothing to do with her decision. mike emanuel is live in washington. what does she say about the skiings? >> she said after her presidential bid she thought about getting out then but figured late in the game it would be hard for a republican to get organized and win. she also pointed out she's clashed with some of her party's leadership. >> i have considered it to be both an honor and a privilege but most importantly, a significant responsibility. even when it means resisting the policy positions of many in my own political party, i've always strived to be first and foremost a public servant and do what it best for the people and never acquiesce to being a political servant. there's a difference. >> trace: some tea party leaders said shelling missed. there have not been statements

singing her praises from house g.o.p. leadership. >> trace: if she did run, chances of winning? >> probably a close race. she beat jim graves 50.5 to 49.3. graves said he's going to run again. a democrat and former chief of staff on capitol hill says bachman knew it would be tough. >> it became very clear to michelle bachman she couldn't win. she was facing a formidable opponent was to going to fund raise well. she lost touch with her constituents. it was a lose-low situation and she decided to drop out and because of that, many democrats and probably as many republicans are he ecstatic. >> about the last point, there are some republicans who believe it will be easier to hold on to that seat with somebody else running. >> mike, thank you. a former college football star has turned up dead. but officials say they're still not sure how he died.

police say they found cullen finnerty's body yesterday in a remote area in western michigan. family members reported his missing on sunday during a fishing trip. an autopsy shows no signs of heart trauma. investigators say they do not suspect foul play. finnerty was a quarterback who led michigan's division two grand valley state to three national championships. played proball for a short time with the broncos. >> health officials sounding the alarm about a deadly virus like sars. it's killed at least 2 dozen people and it's spreading. the details are next.

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>> trace: health officials warn the deadly new virus found in humans is a threat to the entire world. it's called the novel coronavirus. so far the world health organization reports at least 27 people died out of 49 cases. experts say it acts much like sars, the global epidemic that killed nearly 800 people after a came out of china. this novel coronavirus causes difficulty breathing and kidney failure. they've identified cases it other countries including europe. joining us, dr. michael anderson. i know you say don't panic but when the world health organization says it could be a threat to the entire world, you got my attention. >> good afternoon. i would agree with w.h.o. leadership we take thisseriousl. we have to monitor the virus,

the novel coronavirus, but it's 49 cases across the globe. there are about half those patients have passed away but the good news in this modern healthcare system where we have reacted to sars in the past, we've gotten networks that monitor for viruses and respond. i agree we have to take it seriously and monitor for it but we're talking about 49 cases across the globe. it's going to take time to see how big it gets. >> trace: to start, 44 to 49 cases but when the w.h.o. says we don't know where it's hiding, the virus, and we don't know ho how to detect it. if we don't know where it hides or how to detect it, how do we protect ourselves? >> we have to monitor for it so the cdc and w.h.o. has sent out monitoring guidelines to hospitals and physicians across the world. if you have patients with this

consolation of symptoms, think about this novel coronavirus and test for it. send us the samples or to the w.h.o. the second is to have vigilance. if you have a patient that doesn't make sense. why in the middle of the summer are they sick to respiratory symptoms. we see flu in the fall and winter. >> the optimist in me tells me take it seriously and monitor for it but we've learned a lot the last decade since sars and novel coronavirus. this country and the world are well prepared for these epidemics. >> trace: yeah. we should take it seriously. it sounds like a good disease, novel coronavirus sounds like a book and good beer on the beach in the summer but it's not. dr. anderson, thank you. we've got to go. good to see you. >> my pleasure. there are luxury cars, luxury homes and apparently luxury produce. how a buyer forked over thousands of dollars for a couple of melons.

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>> trace: then there's this before we call it a day on "studio b." food keeps getting more expensive. every time you go to a supermarket it seems to get worse. fortunately it appears we have nothing on japan. in a nation where folks have no problem spending five bucks for

an apple. somebody spent $16,000 for cantaloupes at an auction for fruits and vegetables. they weighed four pounds each, $2,000 per pound. some melons are sold at swanky department stores at gifts because for some reason, cantaloupe is a status symbol in japan for reasons we cannot explain. but at the same high end fruit stores, you can buy strawberries for 7 bucks apiece. they're like that big. good stuff. all the money you made in your 401(k) yesterday you gave back. the dow was down is 104. now down 97 points. the 100 plus gain yesterday not so good but the dow doing well, up 20%, 15,300 plus. i'm trace gallagher in for shepard smith. that's it for "studio b." harris faulkner is in later with the "fox report" 7:00 p.m.

eastern time, 4:00 in the west. you want more on the dow, keep it here because your world is neil cavuto is coming up next. have a great day. we'll see you back here later. >> thank you, trace. you know things are bad when this healthcare law isn't taking a lot of democrats sick. welcome, i'm neil cavuto. ahead of 2014 try 78. as in a 78 page tool kit nancy pelosi is handing out to help democrats sell the healthcare law. a timeline of upcoming key dates and who to target namely seniors, women, young adults. this as headlines pile up the law could cost democrats their jobs and might be enough to give republicans the senate. pad